Do you have a strategic plan for the second half of this year? Granted, the retail automotive industry has been on a roller coaster lately. But now is the time to assess your dealership’s performance over the past two quarters and set some milestones to achieve your end-of-year profit metrics. A successful second half of 2022 will require some flexibility and willingness to change behavior.
Looking ahead, there are several factors which spell opportunity for dealers to capture notable revenue in the second half of the year. Strong consumer financial positions, credit terms which remain largely favorable, and continued pent-up demand bode well for savvy dealers. While the Federal Reserve has raised interest rates and recession rumblings linger, consumer financing is still discounted when compared to rates during the Great Recession. According to the Federal Deposit Insurance Corporation (FDIC) quarterly report, aggregate monthly personal income has rebounded to pre-pandemic averages and auto loan volume has recovered faster than in previous down-turns.
For dealers, these favorable credit terms also spell revenue opportunities for those who strategically manage their inventory purchasing and pipeline sales. While inventory and supply chains remain an issue, the wheels are beginning to turn and factories are cranking out more units, albeit maybe ones without heated seats or auto-folding mirrors. Used car inventory is also improving, with bulk-sellers like CarMax reporting sufficient inventory to meet 30 days’ worth of demand. Rising interest rates may also be working in the industry’s favor for once, prompting a bit of a cooling effect on demand and allowing OEMs to catch up.
There were a couple of surprising bright spots in April, as retail automotive dealers continued to deal with the impact of COVID-19. According to Autodata Corp, sales of the highly lucrative pickup segment dominated cars in the U.S., for the first time, by more than 17,000 — 186,417 pickups vs. 169,234 cars. In addition, with sales for April and early May coming in stronger than expected, automakers are already starting to rehire people and open up operations. While these are only two data points, they do provide a bit of good news in the dismal daily drumbeat.
The fact remains, however, that we are in uncharted waters. The good news is that not all steps forward are countered by a step back. Consider these data points:
Step Forward:Affordability – Interest rates are at an all-time low, making financing a vehicle pretty attractive.
Step Backward:Job Market – In April, the unemployment rate skyrocketed to 14.7% with 23.1 million people unemployed, but some industries are experiencing tremendous demand.
Chances are, you ended the third quarter in fairly positive territory. The majority of OEMs showed positive sales growth. The Federal Reserve cut interest rates a quarter point. Hiring remained strong in the majority of the US and the consumer optimism index is still high. Looks like it’s going to be a good Christmas!
Just like in the movie, Christmas Vacation, you can’t have good news without the bad. The political climate continues to make headlines. Tariffs remain in place, impacting both parts suppliers and OEMs. A battle over fuel efficiency is brewing in many state legislatures. And, the competition for good employees is stronger than ever.
As a dealership owner looking to thrive in the months ahead, what should you do? Focus on what’s in your control and invest in your best assets – your people.
Your people are your best assets. It’s an old adage but it’s true! Even with the move to more digital engagement, people are still critical to the retail automotive process. Keep it simple. Focus on the two tenets of staffing your dealership: hiring and retention.
When it comes to hiring, there was a nugget of good news in the recent Cox Automotive 2019 Dealership Staffing Study. The study found that generations are showing higher levels of interest in working at a dealership, specifically:
32% of Generation Z workers
36% of younger Millennials
This interest is nearly 10 percentage points higher than interest shown by older Millennials in their late 30s and early 40s (21%) and Gen Xers in their 40s and 50s (19%).
But these new employees will not be satisfied with a dead-end job and no opportunity for cross training or advancement. Make sure you understand that to retain these younger employees, they require feedback, opportunities for growth, and a management structure that fosters innovation. They’re not worker bees. They want to take an active role in their careers and your dealership. Give these new assets the training that supports their energy!
While you’re focused on hiring bright, shiny new employees, don’t forget about the great staff you already have in place. Keep your current team member assets engaged and invested by removing barriers for success.
Do you have a Top Performing salesperson who would like to become an F&I manager? Great! They already know your business. Now they just need the tools to grow and work even harder for you! Send them through both F&I and compliance training so that when they start work in F&I, they’ll sell your consumer protection products the right way, increasing both your margins and dealership compliance, not to mention customer satisfaction!
Do you have a service technician with excellent customer rapport? Fantastic! Give them a path to becoming a service manager and equip them with the right training for success. Will you have to back-fill those jobs? Possibly, but your new hires will see there is room for growth and your newly advanced employees who have experienced your commitment to their success will be more likely to stay.
There are lots of things swirling around in the world that could impact all industries. However, many of them are out of your control. What happens inside the walls of your dealership is in your control. And, investing in the people who share the space with you will help you thrive, not just survive. It’s a tried and true recipe for success.
With more than 40 years of experience helping dealers achieve their profitability goals, EFG Companies knows how to recruit and train your team into Top Performers. Contact us today to get started.